External auditors
Energinet.dk’s annual report is audited by Rigsrevisionen (the national audit office of Denmark) in pursuance of the Danish Financial Statements Act and the Danish Act on the Auditing of Governmental Accounts etc.
The Supervisory Board presents Energinet.dk’s financial state-ments. As auditor for Energinet.dk, the Auditor General reports to the Supervisory Board. The Auditor General may report on the audit to the members of the Danish Public Accounts Com-mittee at their request or on his own initiative. A draft for a pos-sible report to the members of the Danish Public Accounts Committee is presented to the Supervisory Board and the Min-ister for Climate, Energy and Building for comments.
Internal auditors
The internal audit is handled by a state-authorised accountant who also audits the financial statements of Energinet.dk’s sub-sidiaries. It has been agreed that the details of the tasks to be performed in connection with the internal audit and the rela-tionship with the Auditor General are governed by Section 9 of the Danish Auditor General Consolidation Act.
Group Executive
Board Supervisory
Board Stakeholder Forum
Fixed basic pay YES YES YES
Cash bonus scheme NO NO NO
Share-based incentive scheme NO NO NO
Severance payment 12 mths. NO NO
Pension 0-15% NO NO
Fee for committee work and ad hoc tasks NO NO NO
Travel allowances *) YES YES YES
Other payments YES NO NO
*) refunded according to vouchers submitted
Table 1: Composition of remuneration for Supervisory Board, Executive Board and Stakeholder Forum
Fixed
salary Pension Other payments Total
Peder Østermark Andreasen 2.9 0.4 0.1 3.4
Torben Glar Nielsen 1.7 0.3 0.1 2.1
Torben Thyregod 2.0 0.0 0.1 2.1
Group Executive Board, total 6.6 0.7 0.3 7.6 Table 2: Group Executive Board remuneration
Annual Report 2011 – Energinet.dk
Based on a tender process, the audit firm PwC has been chosen to perform the internal audit. The Auditor General supervises the internal audit.
Risk management and internal control
Energinet.dk’s risk management and internal control environ-ment in respect of the reporting processes aim to safeguard effective control of the risk of material misstatement. Energin-et.dk must ensure that there are no weaknesses in the internal control system which may result in material misstatement in the financial statements.
The internal control environment at Energinet.dk is based on the corporate governance principles. Energinet.dk uses an adapted version of ‘The COSO Framework for Enterprise Risk Manage-ment’ to ensure that the selection and performance of internal control is based on well-documented business processes and identifies all significant risks. The framework also forms the ba-sis of the general risk management process at Energinet.dk.
Internal audit committee
In 2011, Energinet.dk’s management decided to establish an internal audit committee to further strengthen the financial reporting and the internal control environment. The internal audit committee reports to the Executive Board, and the inter-nal auditor reports to the interinter-nal audit committee. The com-mittee approves the terms of reference, audit plan and budget for the internal audit.
Through the internal audit committee and internal audit, Man-agement ensures ongoing follow-up on the internal control environment.
The Supervisory Board annually assesses the need for strength-ening the organisation of the internal audit environment. It is the opinion of the Supervisory Board that the current organisa-tion adequately safeguards an efficient control environment.
Whistleblowing
The Supervisory Board has decided to establish a whistleblowing scheme to enable employees or other stakeholders to anony-mously report suspected violations of ethical guidelines and financial fraud.
The whistleblowing scheme, which will be established via an external supplier, will be accessible via telephone and the Inter-net. The scheme must be approved by the Danish Data Protec-tion Agency and will enter into force when such approval is available, presumably by 2012.
Corporate governance practice
Corporate governance is an issue which Energinet.dk’s Supervi-sory Board continuously discusses based on the enterprise’s activities, external framework, history etc. Corporate govern-ance is a dynamic process in the course of which Management continuously assesses the need for changes.
New recommendations on corporate governance were intro-duced in Denmark in 2011. Energinet.dk complies with most of
these recommendations, although the enterprise as an inde-pendent public enterprise is not under an obligation to do so.
Due to Energinet.dk’s ownership structure, a few areas in the recommendations are without relevance to the enterprise. En-erginet.dk therefore does not comply with the recommenda-tions in the following areas:
• Publication of quarterly reports
• Establishment of permanent board committees and an actu-al audit committee
• Fixing of a retirement age for members of the Supervisory Board
• Appointment of a deputy chairman of the Supervisory Board.
Public and internal supervision
The Danish Access to Public Administration Files Act, the Dan-ish Public Administration Act and the DanDan-ish Ombudsman Act apply to the operations of Energinet.dk and its wholly owned subsidiaries.
Energinet.dk prepares relevant internal monitoring pro-grammes to avoid discriminatory behaviour in connection with the transmission and TSO activities relating to the supply of electricity and gas.
Openness and transparency
Energinet.dk has set up procedures to ensure that it provides the information which is essential to the owner.
The communications policy is based on openness and dialogue as the stakeholders – be they customers, cooperation partners, citi-zens, authorities or the press – have a legitimate expectation that Energinet.dk, a public enterprise with an important role in society, communicates openly and transparently about its activities.
Risk management
Energinet.dk always strives to have an overview of the strategic, operational and project-related risk factors and to manage them in order to achieve its objectives. The Executive Board is responsible for ensuring a systematic, integrated process for ongoing risk assessment and has laid down the overall strategy for the ongoing risk management, which includes making cer-tain that the risk management supports the overall internal control environment.
The aim is to control risks proactively through active and dy-namic risk management in order to safeguard the enterprise’s continued growth and protect its employees, assets and repu-tation. This means that Energinet.dk:
• applies an effective and integrated risk management system while maintaining its business-related flexibility
• identifies and assesses significant risks associated with the enterprise
• monitors, controls and limits risks.
The Executive Board informs the Supervisory Board of the sta-tus of and development in the most significant risks and any action plans on an annual basis.
Annual Report 2011 – Energinet.dk
As part of its risk management, Energinet.dk focused in 2011 on organising and optimising the risk management area. As men-tioned in the section ‘Control environment’, Energinet.dk has chosen to use an adapted version of ‘The COSO Framework for Enterprise Risk Management’. The foundation has thus been laid for further optimisation and streamlining of the cross-organisational handling of risks.
Risk management process
Energinet.dk’s risk policy outlines the overall guidelines for risk tolerance, including guidelines for financing, credit granting and insurance. These guidelines are dealt with separately and are specified in the finance, credit and insurance policies. The policies are revised regularly to ensure the timely re-assess-ment of the risk tolerance. The risk policy is approved by the Supervisory Board once a year.
Each quarter, the business segment managers report on the most significant risks along with plans or processes for manag-ing these risks. Risk Management, which is a support function for the CFO, challenges the business segments in respect of the sta-tus reported. The stasta-tus is reported to the Executive and Supervi-sory Boards through the quarterly financial reporting process.
The quarterly reporting includes a statement of accumulated credit losses and own-risk payments to ensure that the Super-visory Board has up-to-date information about the financial consequences of the risk, finance, credit and insurance policies, and thus enable the Supervisory Board to make recommenda-tions for risk-reducing initiatives if deemed necessary.
To counter any new risks, the risk picture is updated once a year.
A risk report is prepared containing an assessment of the most important business risks involved in realising Energinet.dk’s strategic and operational objectives and of the risks associated with financial reporting. The report is presented to the Supervi-sory Board for approval.
Risk assessments are carried out based on the likelihood of an event occurring and the possible derived consequences for En-erginet.dk, see Figure 3. The consequences are assessed on the basis of several criteria, eg the financial impact on both Energi-net.dk’s finances and the economy, the enterprise’s image, the environment, and health and safety.
Limiting and corrective actions are launched regarding the most significant risks, which are thus managed and controlled.